Nearshoring in Mexico – Changing the Nation’s Future

Listeners discover how nearshoring involves the relocation of supply chains from one country to another, and how this has occurred increasingly as a result of deglobalisation trends, thanks to factors such as COVID-19, limited semiconductor production, the commercial situation between the US and China, Russia’s invasion of Ukraine and other geopolitical conflicts in various areas of the world, which have all led to higher costs and delays in the supply chain.

Bringing inputs and raw materials closer to the place of their assembly provides greater control over the supply chain, making it easier to source vendors and suppliers locally when needed. In addition, in a rapidly changing market, nearshoring allows for quick responses to shifts in customer demands, enhancing business agility and adaptability.

There are several reasons Mexico has positioned itself as an attractive destination for foreign companies wishing to establish a presence, and the speakers discuss these, noting the country’s economic stability, foreign direct investment potential, the fact that it is part of an international network of treaties, its infrastructure, and government incentive and development programmes. They discuss the competitive advantages Mexico offers, including lower logistics costs, qualified labour at lower production costs and enhanced oversight thanks to reduced distance between production and consumption centres, to name a few.

In addition, Mexico has enjoyed economic stability for over two decades. Demonstrating fiscal discipline and true independence of its monetary policy, it has been able to maintain economic stability even in times of global financial or political turmoil.

As such, the country has become an attractive destination for relocating value chains from countries all over the world.

China has invested heavily in multiple areas, as have South Korea, Japan and Taiwan. Europe is active through Spain, Germany, France, the UK, Belgium and the Netherlands, among others, each actively exploring nearshoring opportunities. Argentina, Colombia and Brazil have also been on the list of direct foreign investment into Mexico for a number of years. 

As for economic sectors benefiting from nearshoring, manufacturing captures more than half of foreign investment; financial services, hospitality and mining, all related to this trend, are also growing.

The speakers point out that this highlights the need for a comprehensive industrial development plan that emphasises the various nearshoring-related factors to be considered, including the industrial priorities of the country, positive as well as negative impact, and the views of stakeholders from every sector. In addition, it is essential to address and tackle multiple associated issues, such as infrastructure, insufficient energy and water, rule of law, and insecurity, among others.

According to the Global Companies Council, Mexico has a six-year window of opportunity to attract new investment, create between two and four million jobs, receive between USD30 and USD50 billion per year, increase Mexico’s GDP between 1.5% and 2.5% in the long term, and increase labour productivity between 15% and 30%.

The Tec de Monterrey University has reiterated that nearshoring can improve economic conditions and strengthen ecosystems, including governments, industry and educational institutions, in order to stimulate innovation, technological development and technology transfer.

Also relevant is the transformation that could occur in Mexico through nearshoring, considering that the investment and development not only involve trade, but infrastructure, electricity, education, training, transportation and other areas that will improve people’s lives and therefore, the economy of the whole country, offering both challenges and many opportunities.